Bank of Canada lifts key interest rate by a full percentage point

The Bank of Canada on Wednesday lifted its benchmark interest rate by 100 basis points, or a full percentage point, citing inflation that remains “higher and more persistent” than policy makers had expected. The bank lifted its policy rate to 2.5% from 1.5% and said further increases would be needed as it raised its inflation forecast. In a statement, the central bank said inflation was likely to remain around 8% in the next few months. “While global factors such as the war in Ukraine and ongoing supply disruptions have been the biggest drivers, domestic price pressures from excess demand are becoming more prominent. More than half of the components that make up the CPI are now rising by more than 5%. With this broadening of price pressures, the Bank’s core measures of inflation have moved up to between 3.9% and 5.4%. Also, surveys indicate more consumers and businesses are expecting inflation to be higher for longer, raising the risk that elevated inflation becomes entrenched in price- and wage-setting,” the bank said. The U.S. dollar was down 0.1% versus its Canadian counterpart
USDCAD,
-0.04%
at C$1.3005.